One of the most interesting things to come out of Microsoft’s (MSFT) transformation under CEO Satya Nadella is its investment in quantum computing.

Wednesday I had a chance to catch up on those developments with two executives, Todd Holmdahl, the VP running the team, “Microsoft Quantum,” and Dr. Julie Love, the head of business development, who stopped by the Barron’s offices while in town for various meetings. I discussed their efforts in this week's Barron's print magazine column.

Before you roll your eyes, quantum may be nearer to reality than you think.

“Five years from now, we will have a commercial quantum computer,” says Holmdahl.

The best qubits

A quantum computer hasn’t yet been built, it is in the process of being prototyped.

But Holmdahl, a 24-year Microsoft veteran who previously ran Microsoft’s Xbox group, and Love, who has a PhD in quantum physics from Yale, and who has advised quantum startups and worked as a consultant at McKinsey, both believe Microsoft has come up with something very special.

Microsoft’s “qubit,” the fundamental unit of computation in a quantum computer, is better than the competition, they say.

"We believe we have the most stable qubit of anyone,” Holmdahl tells me.

It has to do with low, low error rates, Love explained. "We are targeting an error rate of 10 to the minus 6, substantially better than the average others are getting, which tends to be around ten to the minus two, or ten to the minus three."

The advantage of a lower error rate is a less complex system, one needing less redundancy:

The traditional error-correction approach in computing is to throw more bits at the problem, and then just have them vote. But in quantum, if you have error rates that high, you have to have thousands of extra qubits to error correct each qubit. Being able to solve real world problems, we need to scale systems to hundreds and then thousands of qubits. And if each one of those qubits has to have thousands of duplicates, that becomes a very complex problem.

Homdahl chimes in, “We find that it's very hard to scale with the other qubits that are out there.”

Firms that are pursuing their own quantum efforts include Alphabet's (GOOGL) Google unit and IBM (IBM).

The Majorana breakthrough

The turning point came in the past six years, with a breakthrough by scientists including Leo Kouwenhoven, a professor of applied physics at the Delft University of Technology in the The Netherlands, and now principal researcher at Microsoft.

The Majorana has been key to acting as a “storage” element for qubits, and Microsoft feels it has made substantial progress since 2012. “By 2016, we had enough control finally of the Majorana particle that we wanted to go into a program to make a commercial product,” says Holmdahl.

Holmdahl’s prediction of five yeas for a commercial system is somewhat eye-opening, given some scientists have projected many decades more for the effort. An article in Nature magazine by Davide Castelvecchi, last July, quoted Princeton University physicist Zahid Hasan as saying Microsoft’s flavor of qubit is probably still “four decades away."

But Holmdahl insists, “We will have a topological qubit by the end of 2018,” referring to the team's unique use of the mathematics of topology, which is central to what Kouwenhoven and the team are pursuing.

Soup to nuts quantum

When asked whether it’s hardware, or software, a bit of a ridiculous question in the realm of quantum, Holmdahl replies, "We are working on a complete quantum system; We are building a complete, end-to-end stack."

"With one hundred to two hundred logical qubits, we can solve real-world problems,” promises Holmdahl. Mind you, "every logical qubit needs ten to twenty qubits to solve it,” he explains, meaning that one is still engineering a system with thousands of components.

It’s a serious trip into hard, hard hardware, on the one hand, for the software giant.

Components are currently operating in a “dilution refrigerator” in Microsoft’s data centers, with the two critical isotopes of helium chilled to temperatures ranging from 15 millikelvin, equivalent to -459.6 degrees Fahrenheit, on up to a balmy 77 kelvin, or -321.07 Fahrenheit.

One can see how this could be a giant boost to Azure cloud computing services if Microsoft is successful. This thing needs big data centers, it needs professional staff. It is not going to be on your desk anytime soon. And by making it an Azure service, as it plans, Microsoft improves the profile of Azure beyond mere commodity computing, and that would surely lead to higher-margin services for Azure.

On the software side of things, Microsoft already has a big push to bring in developers by using simulation of quantum computing on conventional, or "classical" computers.

The company late last year rolled out its first developer tools — you can write “Hello World” in Q#, a variant of the company’s C# language. You can run it on your laptop, where it will model up to 30 “logical” qubits. You'll also be able to run simulations on Azure, which is good because to do 40 qubits, you would need 16 terabytes of DRAM. Hence, there is again an argument for doing it all in the cloud.

"We are starting to work with customers today, with quantum and quantum-inspired algorithms on classical hardware,” says Holmdahl.

There is a limit to such simulation systems. As Love notes, “To simulate 260 qubits, you would need more bits than there are atoms in the known universe.” At some point, the real work needs to move to the actual quantum machine.

Finding out what it’s good for

But what’s it good for?

“We’re doing this so we can solve real customer problems,” both Holmdahl and Love repeated multiple times.

The team is in the process of finding out what applications will be best suited, says Holmdahl:

Julie is talking with tons of prospective customers. We’ve taken the approach we took with HoloLens, given the complexity of this is similar to the complexity we had to deal with in HoloLens. We have quantum experts talking to domain experts, such as chemists, and then we can take that and build a prototype off of that [...] Quantum is not going to run your email right away, maybe not ever. There are a lot of things that run on a classical CPU that will just stay there. But some stuff with a need to be sped up will see enormous benefits. You’ll see speed-ups in quantum chemistry, for example, particularly for heavier metals. In the development cycle for chemicals and materials, we will be able to dramatically short-cut the development cycle versus classical computers. That will be particularly useful for things such as metals and rare earth minerals. And certain classical compute problems that would take years and years to solve on a classical system.

Really hard problems

Love points out that quantum computing is not that much about “Big Data” or other memory-intensive operations. It is really a return to very brawny logic gates, if you will:

This is not really about Big Data, per se. Loading all of that data would take a long time for a quantum system. Instead, you have hundreds of hundreds of quantum states to exploit to solve hard computational problems.

Those really hard computation problems could involve artificial intelligence. “You could, for example, see an exponential speed-up in training of machine learning systems, for A.I., for example,” offers Love.

Homdahl offers another intriguing possibility: "The first quantum computer is going to build the next quantum computer."

"We are working on things such as room-temperaturesuperconductors, and we think quantum can help us get there,” he adds.

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